Understanding Tax on Tax Adjustments

India tax regimes often base tax calculations on another tax, which is referred to as tax on tax. For example, the taxes for excise, service, TCS, and VAT tax types are calculated in two ways:

• Based on the specific tax type.

• Based on a percent of the specific tax type.

The system uses formulas to define calculations for tax on tax. For example, to set up a tax adjustment, TAX2, that is 25 percent of a prior tax price adjustment, TAX1, you:

• Set up adjustment controls for each tax name on the Modify Adj. Controls form.

• Add the adjustments to a schedule in sequential order, TAX1 then TAX2.

• Define the TAX2 tax on tax formula as #(TAX1).

• Define a price adjustment for TAX2 with a Basis Code of 7, Factor Value Numeric of 25, and Formula Name of TAX1 on the Price Adjustment Definition form.